Rule 2019: A Kinder, Gentler, Amendment

The Advisory Committee on Bankruptcy Rules of the Administrative Office of the U.S. Courts has pulled back from its earlier position on the disclosure required of hedge fund and other distressed debt investors participating as ad hoc committees or other, loosely organized creditor groups in Chapter 11 cases.

An earlier version of proposed amendments to Federal Rule of Bankruptcy Procedure 2019 would have required such investors to disclose the dates and prices paid for their purchases of distressed securities.Â These changes were resisted by investor groups such as the Loan Syndications and Trading Association, and created some press coverage last year (an earlier post on the amendmentsÂ is available here).

That said, investors will still be required to reveal the â€śdisclosable economic interestâ€ť they each hold in a company, including debt and derivatives. This includes the identity of specific investors and the date such investors acquired their interests.

Morever, Committee notes to the proposed rule indicate that the previously-contested disclosures of pricing and purchase dates may be compelled through discovery or by the Court acting under its own authority outside the proposed rule.

A copy of the proposed rule, along with a summary of comments received on earlier versions and the Committee’s advisory notes,Â is available here.